“The SNB takes care to ensure that its investments do not
disrupt the markets,” Zurbruegg said at an event in Geneva late
yesterday. “We are aware that the huge amounts we have under
management could impact significantly on market prices.”

The SNB, led by President Thomas Jordan, has been forced to
pile up unprecedented currency holdings to defend a franc
ceiling of 1.20 per euro introduced in September 2011. While
reserves fell last month, they still amount to almost 70 percent
of the country’s gross domestic product.

The franc has weakened about 0.4 percent versus the euro
over the past three months after the European Central Bank
pledged to buy government bonds of distressed nations in tandem
with the region’s rescue fund to help fight the fiscal crisis.
It traded at 1.2063 versus the euro at 10:12 a.m. in Zurich and
was at 94.74 centimes against the dollar.

Zurbruegg said policy makers “are convinced” that the
franc policy is “effective, and we shall continue to pursue it
with the utmost determination.” The SNB will hold its next
monetary assessment on Dec. 13.

‘Market Perception’

“In light of the softening Swiss growth momentum of late,
a change in the lower boundary in euro-franc at the forthcoming
quarterly Monetary Policy Assessment would be a major
surprise,” Reto Huenerwadel, an economist at UBS AG in Zurich,
said in an e-mailed note today. He also “confirmed market
perception of a traditionally very risk averse investor.”

The SNB said on Oct. 31 that the share of euro holdings was
at 48 percent of reserves at the end of the third quarter, down
from 60 percent at the end of June. The share of dollars,
pounds, Canadian dollars and yen increased in that period.

Government bonds in their own currencies accounted for 83
percent of the SNB’s assets at the end of the third quarter,
with equities at 12 percent. Fixed-income assets with a AAA
rating accounted for 86 percent of holdings.

Market Impact

The central bank’s asset management is based on “security
of investments and their liquidity,” according to Zurbruegg. It
also makes sure that volumes placed on markets don’t have “any
perceptible” impact and chooses “major international
currencies with a liquid market,” he said.

“The SNB is constantly assessing ways to improve the
diversification of its investments,” Zurbruegg said. “We
actively analyze and monitor new asset classes and different
currencies in both advanced and developing economies in order to
reduce our risk concentration over time.”

The euro is the SNB’s “principal investment currency,”
according to Zurbruegg. About 12 percent of investments are in
equities, the highest since 2004, he said, adding that the
Zurich-based central bank doesn’t buy stocks in Swiss companies.

The SNB started boosting foreign-currency holdings in March
2009, when policy makers began their first round of purchases to
stem the franc’s ascent. Investors have been seeking the Swiss
currency as a haven from the global turmoil.